Opposition On January 24, 2014, the
Republican National Committee passed a resolution calling for the repeal of FATCA.
[50]American Citizens Abroad, Inc., (ACA) a not-for-profit organization representing the interests of six million Americans residing outside the United States, asserts that the very basis of FATCA legislation is the real problem: citizenship-based taxation (CBT). ACA calls for the U.S. to institute residence-based taxation (RBT) like other developed countries.
Costs There are wildly varying estimates of the likely cost of implementing the legislation. FATCA is expected to produce approximately $8.7 billion in additional tax revenue over 10 years, which is small relative to the estimated $40 billion per year cost of international tax evasion.
[51]:36 The
United States Congress Joint Committee on Taxation estimated that the FATCA bill would raise $792 million of additional taxes a year in the next ten years.
[52]Estimate of the costs to the private sector, the IRS and foreign revenue authorities are less precise. Compliance cost to financial institutions alone has been roughly estimated at US$8 billion a year,
[53] approximately ten times the amount of estimated revenue raised. The United Kingdom government has estimated that the cost to British businesses alone will be £1.1 billion to £2 billion for the first five years (approximately two thirds of the estimate total additional global tax revenue expected).
[54] According to the
Financial Post, the
Scotia Bank in Canada has already spent almost $100 million.
[55][56] There are few reliable estimates for the additional cost burden to the IRS, although it seems certain that the majority of the cost seems likely to fall on the relevant financial institutions and (to a lesser degree) foreign tax authorities who have signed intergovernmental agreements.
Implementation Domestic FATCA added
26 U.S.C. § 6038D (section 6038D of the Internal Revenue Code) which requires the reporting of any interest in foreign financial assets over $50,000 after March 18, 2010. FATCA also added
26 U.S.C. §§ 1471–
1474 requiring U.S. payors to withhold taxes on payments to foreign financial institutions (FFI) and nonfinancial foreign entities (NFFE) that have not agreed to provide the IRS with information on U.S. accounts. FATCA also added
26 U.S.C. § 1298(f) requiring shareholders of a passive foreign investment company (PFIC) to report certain information.
The IRS issued temporary and proposed regulations on December 14, 2011 for reporting foreign financial assets, requiring the filing of Form 8938 with income tax returns.
[57][58] The U.S. Treasury Department issued final regulations and guidance on reporting interest paid to nonresident aliens on April 16, 2012.
[59] Treasury and the IRS issued proposed regulations regarding information reporting by, and withholding of payments to, foreign financial institutions on February 8, 2012,
[60][61][62] and final regulations on January 17, 2013.
[63][64] On December 31, 2013 the IRS published temporary and proposed regulations on annual filing requirements for shareholders of PFICs.
[65] On February 20, 2014 the IRS issued temporary and proposed regulations making additions and clarifications to previously issued regulations and providing guidance to coordinate FATCA rules with preexisting requirements.
[66][67] International In 2014 the OECD introduced its standard proposed for the automatic exchange of information (AEOI) through its Global Forum on Transparency and Exchange of Information for Tax Purposes. The G-20 gave a mandate for this standard, and its relation to FATCA is mentioned on page 5 of the OECD's report.
[68] Critics immediately dubbed it "GATCA" for Global FATCA.
Implementation of FATCA may involve legal hurdles; it may be illegal in foreign jurisdictions for financial institutions to disclose the required account information.
[69] There is a controversy about the appropriateness of intergovernmental agreements (IGAs) to solve any of these problems.
[70]France,
Germany,
Italy,
Spain, and the
United Kingdom have consented to cooperate with the U.S. on FATCA implementation,
[71][72] as have
Switzerland,
Japan [73] and
South Africa. The deputy director general of legal affairs of the
People's Bank of China, the
central bank of the
People's Republic of China, Liu Xiangmin said "China's banking and tax laws and regulations do not allow Chinese financial institutions to comply with FATCA directly."
[74] Intergovernmental agreements As of April 2, 2014, the following jurisdictions have concluded intergovernmental agreements with the United States regarding the implementation of FATCA.
[75] The agreements generally require parliamentary approval in the countries they are concluded with, but not the United States. The United States Department of the Treasury has published model IGAs which follow two approaches. Under Model 1, financial institutions in the partner country report information about U.S. accounts to the tax authority of the partner country. That tax authority then provides the information to the United States. Model 1 comes in a reciprocal version (Model 1A), under which the United States will also share information about the partner country's taxpayers with the partner country, and a nonreciprocal version (Model 1B). Under Model 2, partner country financial institutions report directly the U.S. Internal Revenue Service, and the partner country agrees to lower any legal barriers to that reporting.
[75] Model 2 is available in two versions: 2A with no Tax Information Exchange Agreement (TIEA) or Double Tax Convention (DTC) required, and 2B for countries with a pre-existing TIEA or DTC. The IGA with Mexico is the only one that has entered into force.
[76][
citation needed]